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Prospectus - AQUILA INC - 9/14/2007 - AQUILA INC - 9-14-2007

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Prospectus - AQUILA  INC - 9/14/2007 - AQUILA  INC - 9-14-2007 Powered By Docstoc
					GREAT PLAINS ENERGY

Michael Chesser Chief Executive Officer

Terry Bassham Chief Financial Officer

Investor Presentation

Great Plains Energy / Aquila

AQUIL A

Rick Green Chief Executive Officer

Beth Armstrong Chief Accounting Officer

Filed by Great Plains Energy Incorporated pursuant to Rule 425 under the Securities Act of 1933 and deemed filed pursuant to Rule 14a-12 under the Securities Exchange Act of 1934 Subject Company: Aquila, Inc. Commission File No.: 333-142715 This is a corrected filing consisting of a joint investor presentation issued by Great Plains Energy Incorporated and Aquila, Inc. on September 13, 2007.

2

Information Concerning Forward-Looking Statements
This presentation and the statements to be made by Great Plains Energy and Aquila contain forward-looking information related to the proposed acquisition of Aquila by Great Plains Energy, financial forecasts of each company and the combined company, and key assumptions underlying those forecasts. In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Great Plains Energy and Aquila are providing a number of important factors, risks and uncertainties that could cause actual results to differ materially from the provided forward-looking information, including, without limitation, the anticipated uses of proceeds to be received from the sale of certain Aquila assets to Black Hills Corporation; earnings growth; capital expenditures; rate relief; conditions imposed by regulatory approvals for the transaction; actual resulting credit ratings of Great Plains Energy and Aquila; Aquila‟s tax losses and Great Plains Energy‟s ability to utilize those losses; and, the timing and amount of transaction synergies anticipated by Great Plains Energy.

Additional factors that could cause actual results to differ materially from this forward-looking information are located on (i) with respect to Aquila, pages 64-65 of its Form 10-K for the year ended December 31, 2006; and (ii) with respect to Great Plains Energy, pages 14-21 of its Form 10-K for the year ended December 31, 2006, and pages 72-76 of its Form 10-Q for the quarter ended June 30, 2007. Additional risk factors that should be considered are located on pages 28-39 of the definitive joint proxy statement/prospectus included in the registration statement filed with the SEC by Great Plains Energy (File No. 333-142715). It is impossible to predict all factors that could cause actual results to differ from this forward-looking information, and the parties undertake no obligation to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

Forward Looking Statement

3

Additional Information and Where to Find It
In connection with the acquisition of Aquila by Great Plains Energy, Great Plains Energy filed with the SEC a registration statement on Form S-4 (Registration No. 333-142715), containing a definitive joint proxy statement/prospectus and other relevant materials. INVESTORS AND SECURITY HOLDERS OF GREAT PLAINS ENERGY AND AQUILA ARE URGED TO READ THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS AND THE OTHER RELEVANT MATERIALS BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT GREAT PLAINS ENERGY, AQUILA AND THE ACQUISITION. The registration statement, definitive joint proxy statement/prospectus, other relevant materials and any other documents filed by Great Plains Energy or Aquila with the SEC may be obtained free of charge at the SEC‟s web site at www.sec.gov. In addition, investors and security holders may obtain free copies of the documents filed with the SEC by Great Plains Energy by directing a request to: Great Plains Energy, 1201 Walnut, Kansas City, MO 64106, Attn: Investor Relations. Investors and security holders may obtain free copies of the documents filed with the SEC by Aquila by contacting Aquila, 20 West Ninth Street, Kansas City, MO 64105, Attn: Investor Relations.

Additional Information

4

Discussion Agenda
I. Transaction Overview II. Result Of A Robust Process III. Opportunity For Shareholders

5

Enhanced Shareholder Returns


Strong annual dividend yield - currently 5%+


Lower cost and more efficient access to capital


Greater value from Aquila tax benefits through Black Hills transaction


Adjacent utility territories provide opportunity for integration and significant synergies

Lower Risk


Strong track record of success collaborating with regulatory, political and community groups


Investment grade credit rating anticipated to reduce financing costs and facilitate access to capital


Shared synergies mitigate future rate increases and provides opportunity to enhance shareholder value


Diverse generation portfolio mitigates outage risk

Stronger Growth


Focused regional acquisition and attractive strategic growth opportunity

Shareholder Value Proposition
ACQUISTION DELIVERS VALUE TO GXP & ILA SHAREHOLDERS

I. Transaction Overview

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Step 1: Asset Sale

Step 2: Merger

Step 3: Combined Entity

Black Hills Aquila Selected Assets & Liabilities Cash $940m m Great Plains Energy Gregory Acquisition Corp Aquila Aquila Shareholders Cash/Stock $1.80/0.0856 Merger Aquila ~ 27% Great Plains Energy ~ 73%

Great Plains Energy KCP& L Aquila Strategic Energy
►

Regulatory approvals sought from FERC and in CO, KS, MO, and NE.
►

Regulatory approval received in IA; HSR approval attained. Third-Party Approvals
►

$45 million, approximately 2.7% of Aquila‟s announced deal value. $0.075 per share to Aquila. Termination Fees
►

Transaction is terminable by either party after 2/7/2008, with potential for extension until 8/7/2008, if there is a regulatory delay and either party elects to extend. Deal Closing
►

Great Plains Energy will acquire Aquila in a stock and cash merger.
►

Immediately before the Great Plains Energy transaction, BKH will acquire from Aquila: Colorado Electric & Gas, Iowa Gas, Kansas Gas, and Nebraska Gas operations for $940 million in cash (subject to adjustment); BKH has secured $1B bridge financing.
►

Transactions are cross-conditioned. Structure of Transaction
►

$1.80 per Aquila share in cash (approximately 40%)
►

.0856 shares of Great Plains Energy common stock per Aquila share (approximately 60%) Form of Consideration
►

$4.54 per share based on Great Plains Energy‟s closing price on 2/6/07
►

$4.21 per share based on Great Plains Energy‟s closing price on 9/10/07 Implied Merger Consideration

Deal Structure

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Providing safe, reliable customer service will remain a priority throughout the transition process
NE regulatory hearing

CO regulatory hearing

Iowa regulatory approval received

Pirate lawsuit voluntarily dismissed 2007 Se p Missouri regulatory decision

Kansas regulatory hearing & decision

Transaction closing Colorado

regulatory decision 12/18/07

Expected FERC decision

Missouri regulatory hearing Aquila shareholder vote

Great Plains Energy shareholder vote

Nebraska regulatory decision 10/16/07

Great Plains Energy Missouri & Kansas synergy update filing

Termination of HSR waiting period

Great Plains Energy registration statement declared effective by SEC 2008 Q 1 2007 Nov-Dec 2007 Oct 2007 Au g

Expected Milestones

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

Prepare for Day 1 and steady state operations


Continue to successfully manage operations

Integration Objectives
I n t e g r a t i o n

T e a m

&

P r o j e c t

M a n a g e m e n t

-

J o h n

M a r s h a l

l
D e a l

C l o s u r e P l a n t

O p e r a t i o n s E n e r g y

R e

s o u r c e

M a n a g e m e n t D e l i v e r y

&

S e r v i c e E n e

r g y

S o l u t i o n s I n f o r m a t i o n

T e c h n o l o g y F i n a

n c e

&

A c c o u n t i n g S u p p o r t

S e r v i c e s

S t e e r

i n g

T e a m

-

B i l l

D o w n e y
G X P

&

I L A

r e p

r e s e n t a t i o n

o n

a l l

t e a m s

2008 - 2009 Deal Announcement Secure Final Approvals Black Hills Transition Tier 1 Operations Filings Complete February through Deal Approval December ‟06 - January ‟07
Negotiate

Build Integration Plans

Develop Communication Plan

Finalize Contracts

Launch Teams Design the Path to Tier 1 Operations
Develop Integration Plans

Launch Key “Enabler” Activities Develop Common Understanding Complete Key Integration Initiatives Black Hills Transition Steady-State Integration

Implementation Integration Planning and Preparation Deal Planning & Communication
Prepare „Day 1‟ Plan

Integration Plan


Capture deal value & ensure optimal execution


Position combined company for sustainable Tier 1 performance

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Combined Company Organizational Structure Great Plains Energy will retain current 11 directors, 9 are independent Great Plains Energy Executive Management

Note: CGQ = ISS Corporate Governance Quotient

GXP CGQ is better than 94% of S&P 400 companies & 85% of utilities

Michael Chesser, Chairman & CEO William Downey, President & COO Terry Bassham, CFO

Steve Easley, SVP Supply John Marshall, SVP Delivery Barbara Curry, SVP Corp. Svcs. & Secretary Shahid Malik, President & CEO, Strategic Energy
Governance Structure

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

Approximately 800,000 customers


Combined base of about $3.6 billion


Total generating capacity of nearly 5,800MWs


Generating approximately 25 million MWhs annually


Additional scale mitigates operational risk for both Great Plains Energy and Aquila-MO.
Upon closing, KCP&L and Aquila will achieve considerable regional scale

+
FORGING A STRONGER REGIONAL UTILITY

Combined Company Overview

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Recent Recognitions


Customer Call Center certified by J.D. Power & Associates

New rates in 2007


Missouri Electric $58.8 million rate increase plus a 95% Fuel Adjustment (FAC)


Kansas Gas $5.1 million increase


Nebraska Gas $9.2 million increase

Restructuring


Closed Kansas Electric sale on April 1, 2007


Retired $344 million of debt outstanding in June 2007

Aquila Great Plains Energy
Recent Recognitions


Recipient of the 2007 Edison Award from the Edison Electric Institute


KCP&L achieved Tier 1 customer satisfaction in 2007 according to J. D. Power & Associates

Progress continues on the Comprehensive Energy Plan


100MW of wind completed on schedule in 2006



LaCygne 1 SCR (Selective Catalytic Reduction) completed on schedule in Q2 2007


Environmental upgrades ongoing at Iatan 1


Construction continues on Iatan 2

Significant regulatory progress


New rates in 2007 resulting from settlement agreement in KS & rate order in MO that allowed 11.25% ROE


Rate cases filed in KS for $47.1 million (11.25% ROE) & MO for $45.4 million (11.25% ROE) to be effective in 2008

Company Updates - Recent Events

II. Result Of A Robust Process

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Board unanimously recommends merger; accelerates shareholder return & lowers risk profile.
Aquila Board Perspective

Board followed a robust process:


Conducted extensive sales process


Considered fairness opinions of three external advisors


Selected best strategic alternative Transaction value of offer exceeds stand-alone value of Aquila The transaction presents shareholder opportunity:


Significant ownership position in Great Plains Energy, an investment grade company


Ability to participate in meaningful synergies


Benefit from ownership in dividend-paying stock

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Thorough process engaged both interested parties & those identified as logical, strategic candidates.
Fall 2005 to Feb 2006 Strategic review Unsolicited calls of interest received 2006 Feb - Jun Data rooms populated Marketing materials created Internal due diligence performed
Robust Auction Process

2006 May Aquila marketing process began All potential bidders identified

2006 Jun - Jul Nine parties contacted Seven confidentiality agreements signed

Dec 2006 to Jan 2007 Five Access to data One final bid Period of indicative room provided received exclusivity with bids received Great Plains Four Energy & management Black Hills presentations made 2006 Aug 2006 Aug-Sep 2006 Nov

2007 Feb Deal announced Shareholder outreach began

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Diverse interest received in excess of Aquila’s stand-alone value, indicating a healthy, market process.
Indicative Bidder A B C D E Description of Participant Financial party partnering with Strategic party Strategic party Strategic party Strategic party Strategic party Great Plains Energy / Black Hills Indicative Bid Range per Aquila Share $4.50 - $5.00 $4.50 - $4.95 $4.50 $4.15 - $4.60 $4.15 - $4.60 Form of Consideration 100% Cash 100% Stock 100% Cash 100% Stock (potential 20% cash option) 60% stock / 40% cash

Final offer received from strategic party made up of Great Plains Energy & Black Hills.
Indicative Non-Binding Bids

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* Information on this slide excerpted from opinions of Aquila's financial advisors contained in the registration statement filed with the SEC by Great
Plains Energy. This excerpt must be read in conjunction with the full description of Blackstone's, Lehman Brothers' and Evercore's opinions, which were dated as of February 6, 2007. The full description contains important background, assumptions, explanations, limitations and qualifications of their opinion and analyses. Aquila has since made forecast updates to EBITDA projections for known changes (ie., rate case settlements and capital expenditures). The revised projections have not materially changed the advisors' valuations. ILA Stand-Alone Valuations *

III. Opportunity For Shareholders

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Combined company expects to realize $643 million of total savings and synergies in first five years.
$36 m $305 m $302 m $27 m $275 m $120 m $54 m $131 m
Note:



Cost savings are computed using 2006 baseline.

Significant Synergies Expected

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Estimated Five-Year Cumulative Utility Operational Synergies ($305mm)
Note: 

Net of costs of capital, property taxes and similar costs for capital investment-enabled synergies



Requested 50/50 sharing net of estimated transition costs in Missouri and Kansas (KCP&L only).



Reduce non-fuel O&M


Reduction in positions and associated spend


Facility consolidation



Projects that reduce purchased power and increase revenue


Improve Aquila‟s coal unit performance as part of KCP&L‟s fleet


Leverage Aquila‟s capabilities in gas turbines



Supply chain


Consolidated sourcing of expensed and capitalized materials


Inventory/warehouse consolidation and reduction


Vehicle fleet rationalization and centralization
$120 m $54 m $131 m

Regulated Operating Synergies

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KCP&L's

Facility Consolidation

Customer Service

Plant Operations Transmission & Distribution Supply Chain

headquarters to be maintained and Aquila's to be sold Aquila's Raytown facility as primary call center Net reduction of three service centers Apply Aquila‟s experience in revenue cycle management from its multi-state operation to KCP&L Offer KCP&L‟s eServices and energy efficiency programs and skills to Aquila‟s customers - reducing peak requirements and improving the customer experience Leverage scale of KCP&L‟s fleet and cyclone boiler experience in Aquila‟s Sibley 3 plant Apply Aquila‟s gas turbine maintenance capabilities to KCP&L Apply KCP&L‟s outage management and metro area operational capabilities to Aquila‟s T&D network KCP&L Customer Operations location to serve as combined Transmission & Distribution and Emergency Operations Center Supply chain process improvements Reduction of over 140 vehicles, and centralized maintenance


Operational and corporate synergies have been identified that build on the capabilities of both organizations

Synergy Examples

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Corporate Savings 2008-2012
Estimated Five-Year Cumulative Corporate Savings ($302mm)


Reduction of approximately 300 positions including benefits plus miscellaneous bonuses and commissions represents approximately 54% of the total cost reduction


Reduction in outside services such as legal, consulting, audit, director and other fees




Reduction in insurance expenses and legal claims


Redundant IT systems, office expenses, data and communication costs, etc. enabled through utilization of GXP‟s corporate infrastructure
Direct labor not allocated to MO properties Benefits Outside services Other (IT, office expenses, etc) Claims, recovery, insurance, etc.

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Current Merger Regulatory Requests


Retention of 50% of the estimated utility operational synergies, net of estimated transition costs, over 5 years.


100% recovery of transition and transaction costs over 5 years.


Recovery of actual interest costs in Aquila customer rates.


Authorization to use additional amortizations in Aquila rate cases to meet credit metrics, consistent with KCP&L‟s treatment.

Approval requests includes sharing of synergy benefits with customers. Missouri


Approval of the Great Plains Energy transaction and the Black Hills asset transaction.


Retention of 50% of the estimated utility operational synergies, net of estimated transition costs, over 5 years.


100% recovery of transition and transaction costs over 5 years.

Kansa s

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Financial Highlights
Enhanced Shareholder Returns


Shared net synergies requested for 5 years (Utility Operational Synergies)


Efficient use of Aquila's tax position


The transaction with Black Hills is expected to accelerate the utilization of an estimated $147 million of net operating loss (NOL) tax benefits and utilize $105 million in capital loss (CL) tax benefits


Approximately $400 million of tax benefits are anticipated to be utilized by Great Plains Energy over 5 years


Anticipated core earnings per share accretion beginning in 2009


Great Plains Energy current annual dividend of $1.66 per share: 5%+ yield


Expected investment grade credit rating will reduce Aquila's cost of financing

Funding & Capitalization


Great Plains Energy‟s equity ratio target remains approximately 55%


Funding mix for Aquila capital projects expected to be similar to KCP&L‟s Comprehensive Energy Plan projects


Approximately $265 million of Black Hills‟ transaction proceeds anticipated to be available for debt reduction

Enhanced shareholder returns from the combined company

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Estimated Total Utility Rate Base


Capex primarily on common projects


Aquila capex plan in line with KCPL‟s Comprehensive Energy Plan

1. Rate base amounts can vary by state.

Compound annual growth rate of 16% in rate base builds shareholder value.
$3,600 $3,975 $4,150 $5,575

Appendix

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Notes:



All synergy calculations based on 2006 actual data



Emissions are not in current synergy total as Aquila is implementing environmental controls on a stand alone basis



Total synergies include an estimated $302 million reduction in corporate costs, most of which are currently allocated to properties proposed to be sold to Black Hills Corporation.



Estimated interest savings of $36 million is net of $53 million of debt tender costs. Debt tender costs were not netted against earlier estimate of $188 million.



Utility operational synergies are net of costs of capital to achieve certain elements.



Synergy items in current estimate that are expected to continue over time have been escalated by 3.1% per year.

Estimated Five-Year Cumulative Synergies ($643mm)
Utility Operational Synergies ‘Corporate’ costs - not allocated to MO regulated utilities Emissions Credits Interest Savings Operational Synergies (No differentiation between ‘corporate’ and ‘utility’)

Due diligence

GXP team 02/07/07 Preliminary proxy 05/08/2007 Current estimate (GXP & ILA)

$500 $452 $643
Interest Savings (net of debt tender costs)

Synergies Benefit Shareholders & Customers

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Utility Divisions Aquila



Missouri Public Service (“MPS”) and St. Joseph Light & Power (“SJLP”)


~304,000 electric customers


1,748 MW owned generation (53% coal, 43% gas, 4% oil) CO, NE, IA, KS (Black Hills Transaction)


~509,000 gas customers

Gas Utilities
Crossroads Peaker


340 MW gas-fired peaking plant in MS Gas / Merchant Book


14 gas contracts


~300 MMBtu/day throughput


Hedged

Aquila Service Territory

Aquila Gas Aquila Electric

Merchant Services Electric Utilities
Colorado Electric (Black Hills Transaction)
►

~92,000 electric customers
►

102 MW owned generation (42% coal, 28% gas, 30% oil)

GXP acquiring only MO electric utilities and merchant services

Aquila Overview

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Kansas City Power & Light Great Plains Energy


Serving approx. 26,700 customers & 108,500 accounts as of 2Q07


16.6mm MWhs delivered in 2006


YTD MWhs delivered combined with 2007 backlog totaled 19.5mm MWhs as of 2Q07


Total backlog of 36.7mm MWhs as of 2Q07

Strategic Energy


Regulated electric utility in KS and MO, serving the Greater Kansas City metro area


Total generation capacity: ≈ 4,100 MWs


Total customers ≈ 500,000


Customer mix: residential/C&I ≈ 89%/11%

Great Plains Energy Overview

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Anticipated Capital Expenditures

1. Demand Response / Energy Efficiency includes $8M, $8M, $10M, and $13M for the years 2007 through 2010, respectively, of expenditures that are deferred as a regulatory asset pursuant to MPSC and KCC rate orders.

2. CEP capex amounts represent the high end of the estimated CEP capital expenditure range of $1.52B to $1.62B.

3. Rate base amounts can vary by state.

4 Capex amounts do not include AFUDC.

4 4

KCP&L Estimated Capital Expenditures

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(1)

(2)

(1) Source: SEC filings and press releases. Includes fuel/purchased energy savings
(2)

O&M from FERC Form 1 and 2 reported costs in calendar year prior to closing; includes all utility operating companies reported by shown parent firms
median

Announced Synergies as % of Utility Non-Fuel O&M